NCPA - National Center for Policy Analysis

Tax Cutting Europeans

September 11, 2000

According to the Organization for Economic Cooperation and Development, in the last eight years taxes as a share of gross domestic product have risen more in the U.S. than in any other major country. And while taxes are much higher in Europe, they are rising more rapidly in the U.S.

Socialist European governments are cutting taxes on both business and individuals.

  • Last year, Britain lowered its bottom tax rate to 10 percent and cut the basic tax rate paid by most Britons to 22 percent.
  • By contrast, most taxpayers in America are in the 28 percent federal income tax bracket.
  • Britain also lowered the corporate tax rate to 30 percent -- whereas the U.S. rate was raised to 35 percent in 1993.

Prime Minister Tony Blair also slashed the maximum capital gains tax rate from 40 percent to just 10 percent -- which is half the U.S. rate.

German Chancellor Gerhard Schroeder will reduce the top income tax rate from 51 percent to 42 percent, and the bottom rate from 23 percent to 15 percent. The top corporate tax rate will fall from 52 percent to 39 percent, and capital gains taxes on shares owned by corporations in other companies will be abolished.

The French tax cuts, while much smaller, are significant because Prime Minister Lionel Jospin came into office as a hard-line socialist , not a "new democrat." Jospin's tax cuts are heavily tilted toward low income taxpayers, but he is also reducing the corporate tax rate and lowering the top income tax rate on individuals from 54 percent to 52 percent.

Belgium and Italy also plan tax cuts. Unless the U.S. joins in, it could quickly find itself losing the race for talent and capital as both become more and more mobile.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, September 11, 2000.


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